England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LINCOLN COUNTY COURT
Mr Recorder Maw

		Royal Courts of Justice Strand, London, WC2A 2LL
		7th May 2004

Lord Justice Latham :
 


1. This appeal arises out of a tug of war over a light aircraft, a Morian Saulnier MS 893 Rallye aircraft (the Rallye). The appellant, Mr Wiltshire, claims that it is his. Mr Powell, the First Respondent claims that he acquired good title to it having bought it in good faith from Mr Etherington, Mr Heapy and Mr Storey, the 2^nd, 3^rd, and 4^th respondents. They, in turn, say that they bought it in good faith from Christopher Ebbs, who although a central figure in the story, has played no part in this appeal. The unfortunate position which this appeal seeks to resolve is that Mr Wiltshire obtained a judgment on the 21^st November 2000 before HHJ O'Rorke in proceedings simply between him and Mr Ebbs, declaring that he, Mr Wiltshire was the owner of the Rallye; on the 1^st May 2002, Mr Powell obtained a judgment from Mr Recorder Maw which is the subject matter of the present appeal, declaring that he was the owner of the Rallye. Mr Wiltshire appeals to this court on the basis that the issue as to the ownership of the Rallye was determined by the judgment of HHJ O'Rorke, and that Mr Etherington, Mr Heapy and Mr Storey were bound by that judgment and accordingly unable to deny Mr Wiltshire's title before Mr Recorder Maw. As a result, they were not able to pass good title to Mr Powell.
2. Mr Wiltshire and Mr Ebbs were at one time associated together in a venture known as the Spilsby Soaring Trust, of which Mr Wiltshire was trustee. Its purpose, at least ostensibly, was to enable disabled people to fly. It was for a time registered as a charity; but it was deregistered by the Charity Commissioners before the events with which we are concerned as a result of irregularities, which Mr Wilshire ascribed to dishonesty on the part of Mr Ebbs. It would appear to have been common ground in both sets of proceedings that the trust was the owner of a Piper Cub aeroplane (the Piper) which had been originally bought by Mr Ebbs and subsequently transferred to the Trust. On the 31^st July 1996, the Rallye was bought by Mr Ebbs from Shobden Aircraft Leasing, and was registered with the Civil Aviation Authority in Mr Ebbs' name on the 4^th October 1996. Meanwhile, Mr Ebbs sold the Piper on the 25^th August 1996 to Mr Trute. What happened thereafter was a matter of dispute between Mr Wiltshire and Mr Ebbs. On the 13^th February 1998 Mr Ebbs issued a claim against Mr Wiltshire and the Trust for money which was said to be owing to him for work done, and an injunction and the return of the Rallye of which Mr Wiltshire had by then obtained possession.
3. On the 17^th April 1998, Mr Wiltshire filed a defence and counterclaim in which he asserted title to the Rallye on behalf of the Trust. He did not, however, seek to obtain an injunction to protect his position until the 24^th August 1998. He considered that his position was protected by an injunction obtained by Mr Ebbs by consent that he, Mr Wiltshire would not deal in any way with the aircraft. He asserts that this was on the basis of an undertaking by Mr Ebbs that he, likewise, would not deal with it. That undertaking was never recorded as part of any Court order.
4. By then, the Rallye had been sold to Mr Etherington, Mr Heapy and Mr Storey by Mr Ebbs, as evidenced by a document of sale dated the 4^th July 1998, and had been registered with the Civil Aviation Authority in the name of Mr Etherington, Mr Heapy and Mr Storey on the 21^st August 1998. They in turn sold the Rallye to Mr Powell on the 20^th July 2000; and it was registered in his name with the Civil Aviation Authority on the 11^th August 2000.
5. The trial of the proceedings between Mr Ebbs and Mr Wiltshire commenced before HHJ O'Rorke on the 17^th August 2000. The judge heard evidence for two days from Mr Ebbs, Mr Heapy, Mr Wiltshire's wife and two other witnesses called by him. It was adjourned part heard to the 23^rd September. On that day the trial was further adjourned. Mr Ebbs did not appear but had told the court the previous week that he was intending to file his own petition for bankruptcy. The court was further informed on the day of the hearing that Mr Ebbs had been involved in a traffic accident. The final hearing date was fixed for the 21^st October 2000. Mr Ebbs once again did not attend; and there was confirmation that a bankruptcy order had been made against him on the 20^th October 2000. The judge decided to conclude the trial. Although Mr Wiltshire had not given evidence, he had set out his account in the questions that he had put to Mr Ebbs and the other witnesses. Accordingly the judge asked him to confirm those matters on oath and treated the questions as his evidence. The judge then gave judgment dismissing Mr Ebb's claim and giving judgment for Mr Wiltshire on his counter-claim, and in particular his claim to the Rallye. He expressed his findings as follows:

"Furthermore, the curious transactions in respect of these aeroplanes do not reflect well upon Mr Ebbs and I am entirely satisfied on the evidence that I have heard thus far, even without requiring further evidence from Mr Wiltshire, that at the material time the Piper Cub was sold without the necessary authority of the Spilsby Soaring Trust; secondly that Mr Wiltshire accepted the de facto position and accepted the purchase of the Rallye G-AVVJ in substitution of it; and, further, that on or about 24^th July 1998, Mr Ebbs again without authority and possibly dishonestly, sold or transferred, or purported to sell or transfer, that Rallye to a syndicate consisting of three persons: Paul Etherington, Derek Heapy, who was a witness in the case, and one Peter Storey. I am quite satisfied that that was done in the full knowledge that injunctive proceedings had already been started, if abortedly, in the County Court and had been transferred to the High Court, and that was a sale made to defeat any order freezing its disposal. The order which was made was too late.

….

I do not see why in these circumstances Mr Wiltshire, as trustee of the Spilsbury Soaring Trust, should not be able to pursue that aeroplane and take such steps as he may against the current possessor of it for its return, for it seems to me, in the circumstances, no title could have passed to the trio purported to buy it from Mr Ebbs or to any person whom that trio purported to pass on that aircraft. I should say here that those gentlemen clearly knew the background of the dispute to the ownership of the Rallye."

6. Accordingly he gave judgment for Mr Wiltshire, as I have said, and made an order declaring that the Rallye was at all material times the property of Mr Wiltshire as trustee of the Spilsbury Soaring Trust. He further ordered that Mr Ebbs return the Rallye aircraft by 12 noon on the 28^th November 2000 and in default pay damages assessed at £12,000.
7. Armed with this judgment Mr Wiltshire set about trying to recover possession of the Rallye. Knowing that it had been sold to Mr Powell, he answered an advertisement placed by Mr Powell in a magazine offering his and the Rallye's services to tow gliders. As a result Mr Powell flew the Rallye to the airfield designated by Mr Wiltshire. Mr Wiltshire invited Mr Powell to lunch. He had made arrangements that whilst Mr Powell was away from the aircraft, it should be disabled. He then detained the aircraft despite Mr Powell's requests for its return. Mr Powell then commenced the proceedings with which we are concerned which were originally against Mr Wiltshire alone claiming a declaration that he, Mr Powell, was the true owner of the Rallye, and requiring the return of the aircraft or its value, namely £16,000. Mr Powell then managed to retake possession of the Rallye.
8. In his defence, Mr Wiltshire asserted his title to the aircraft based upon the judgment of HHJ O'Rorke and counterclaimed, in his turn, for the return of the aircraft. Mr Powell then amended his claim to add Mr Etherington, Mr Heapy and Mr Storey. Against them he claimed damages and an indemnity were it to be found that they had no title to the Rallye. Mr Etherington, Mr Heapy and Mr Storey asserted that they had good title on the basis that they had purchased it from Mr Ebbs, who had good title, and in any event had purchased it in good faith in July 1998. In Part 20 proceedings, Mr Etherington, Mr Heapy and Mr Storey sought a declaration against Mr Wilshire that they had good and valid title to the aircraft or alternatively, against Mr Ebbs that they were entitled to an indemnity if he had not been in a position to pass good title.
9. The Recorder heard evidence from all the parties except Mr Ebbs who did not appear, and was not represented. It is clear that he considered that Mr Powell had purchased the Rallye in good faith without any knowledge that there were problems about its ownership. He was satisfied that Mr Etherington, Mr Heapy and Mr Storey had purchased the aircraft in July 1998. He rejected Mr Wiltshire's assertion that the sale was a sham. He was however unconvinced that at the time of that transaction they were unaware of the fact that there was a dispute as to its ownership.
10. Nonetheless he was quite satisfied that he could not accept the evidence of Mr Wiltshire. Unlike HHJ O'Rorke, he had had the opportunity to see Mr Wiltshire give evidence and be cross-examined. He was not impressed by his evidence.
11. There were two particular issues which the Recorder considered to be critical. The first, and perhaps most important, was the evidence which Mr Wiltshire put forward in support of the assertion that he, at least as trustee, was the owner of the Rallye. The Recorder noted that there was nothing to substantiate any assertion that the purchase of the Rallye by Mr Ebbs had been financed by the sale of the Piper. But perhaps the most significant aspect of the evidence before the Recorder was the assertion by Mr Wiltshire that when, as he said, disputes as to the ownership of the Rallye came to a head in 1998, Mr Ebbs had over dinner agreed to transfer the title to the aircraft to Mr Wiltshire. The Recorder noted that this had never been part of Mr Wiltshire's case before HHJ O'Rorke, had not been part of any of the pleadings in the original action, had not been part of any of the pleadings in the action with which he was concerned, and had not been either mentioned or even hinted at in Mr Wiltshire's statement. It had certainly not been part of the statement of Mr Wiltshire's wife. She had, in fact, given evidence at the trial before HHJ O'Rorke that the only thing said by Mr Ebbs as to the ownership of the Rallye was to offer a half share in the Rallye after the sale of the Piper.
12. But the fact that he came to conclusions so different from those of HHJ O'Rorke undoubtedly requires this court to look with some care at the validity of the Recorder's decision which is the only one with which we are concerned. And essentially that depends upon an apparently, simple question, namely should the court hold that the parties to these proceedings are bound by the decision of HHJ O'Rorke on the basis that, although his judgment was not given in an action between them, nonetheless the original decision should bind all those before the court today as an estoppel. Like many apparent simple questions, it is fraught with difficulty.
13. There is no doubt that as between Mr Wiltshire and Mr Ebbs, the matter is res judicata by reason of the judgment of HHJ O'Rorke. Mr Ebbs would therefore have been precluded from claiming that he had good title to the Rallye. But neither Mr Etherington, Mr Heapy, Mr Storey, nor Mr Powell were party to those proceedings. The question is, therefore, whether they or more particularly Mr Powell, are nonetheless bound by reason of the fact that their claimed title to the Rallye was derived from Mr Ebbs. It has to be remembered that by virtue of Section 21 of the Sale of Goods Act, 1979, the seller of goods can pass no better title than he has. The good faith of the purchaser is irrelevant.
14. The legal principles applicable in determining the extent to which third parties are bound by a judgment in personam, which the judgment of HHJ O'Rorke was, are not entirely clear, at least so far as claims involving title to goods are concerned. Under the heading "Parties Estopped by Judgment Determining Rights" the editors of Halsbury's Laws of England 4^th Edition (Reissue) Volume 16(2) say, at paragraph 999:

"Parties and privies. A judgment in personam or inter partes raises an estoppel only against the parties to proceedings in which it is given and their privies, for example those claiming or deriving title under them. As against all other persons it does not prejudice the persons before the court, and with certain exceptions, although conclusive of the fact that the judgment was obtained and of its terms, is not admissible evidence of the facts established by it.

Privies are of three classes:

(1) privies in blood, for example, ancestor and heir;

(2) privies in law, for example (formerly) tenant by the curtesy or in dower, and others that came in by act in law, for example testator and executor, intestate and administrator, bankrupt and trustee in bankruptcy;

(3) privies in estate or interest, for example testator and devisee, vendor and purchaser, landlord and tenant, a husband and his wife claiming under his title and a wife and husband claiming under hers, successive incumbents of the same benefice, assignor and assignee of a bond, and the employee of a corporation defending a claim of trespass at the cost of his employers and justifying under their title and the corporation itself.

A judgment of ouster against a corporator would be conclusive evidence against another deriving title under him, for example by his vote.

It is not easy to detect from the authorities what amounts to a sufficient interest. The question seems to be determined by an examination of the factual identity of interests of the parties and the fairness of binding them by a decision in which they were not represented."

15. As to "privies", the Editor of the 3^rd Edition of Spencer Bower Turner and Handley on The Doctrine of Res Judicata says:

"231. The reasons supporting the application of estoppels to privies were explained by Cababe:

"….. although the estoppel is only a personal matter between the particular parties yet to really give the parties the benefit of it, and subject them to the burden of it, it is essential that not they only, but those of whom it can be predicted that they are their representatives in interest should likewise have the benefit of and be subject to the burden of the admission. Upon anyone therefore upon whom all the rights and obligations of any legal entity devolve such as an executor, administrator or trustee in bankruptcy, there will devolve, as one of such rights and obligations, the right to exact or the obligation to be subjected to, the admission; and so too upon any one upon whom the right and obligations arising out of the particular transaction that gave rise to the estoppel devolve, as, for example, a purchaser or assignee, that will also devolve this right and this obligation."

Res judicata estoppels operate for, or against, not only the parties, but those who are privy to them in blood, title or interest. Privies include any person who succeeds to the rights or liabilities of the party upon death or insolvency, or who is otherwise identified in estate or interest. It is essential that the party to be estopped by privity must have some kind of interest, legal or beneficial, in the previous litigation or its subject matter. Privity was described by the US Supreme Court as a mutual or successive relationship to the same right of property, although this cannot be exhaustive. Hence assignees will be bound as privies of the assignor.

Privity is not established by proof of curiosity or concern in the litigation, or "some interest in the outcome". Megarry V-C proposed, as the test of a privity in cases which did not fall into any recognised category, the existence of "a sufficient degree of identification between the two parties to make it just to hold that the decision to which one was party should be binding in proceedings to which the other was party." This has been criticised as circuitous and not helpful in identifying when the necessary degree of identification is present."

16. The passage cited was from the judgment of Sir Robert Megarry V.C. in Gleeson –v- J Wippell & Co [1977] 1WLR 510 at 515. Although criticised, as noted by Spencer Bower, Lord Bingham, in Johnson –v- Gore Wood & Co [2002] 2AC 1 at page 32, cited with approval the whole of the relevant passage in Sir Robert Megarry's judgment, which is as follows:

"Second, it seems to me that the sub-stratum of the doctrine is that a man ought not to be allowed to litigate a second time what has already been decided between himself and the other party to the litigation. This is in the interest both of the successful party and of the public. But I cannot see that this provides any basis for a successful defendant to say that the successful defence is a bar to the plaintiff suing some third party, or for that third party to say that the successful defence prevents the plaintiff from suing him, unless there is a sufficient degree of identity between the successful defendant and the third party. I do not say that one must be the alter ego of the other: but it does seem to me that having due regard to the subject matter in dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in the proceedings to which the other is party. It is in that sense that I would regard the phrase "privity of interest"."

17. It is surprising to find that there is no authority cited in either of the two texts to which I have referred, or in any of the cases to which we have been referred, which deals with the question of whether or not a person who claims title to goods is to be estopped from asserting that claim on the basis of proceedings between others, one of whom is the person through whom he claims his title. None of the examples of privies in estate or interest set out in Halsbury include such a relationship: the cases referring to a vendor and purchaser, relate to real property, that is interests in land, as to which there is a significant body of authority.
18. From this the following principles are clearly established. First, the same title must have come into question in both actions: Doe –v- The Earl of Derby (1834) 1Ad and El 783. This is because there must be an identity of interest between the party to the first action and the party to the second. As a result the specific interest in question has been represented in the earlier proceedings. The second, which follows from the first, is that any person deriving whatever interest is claimed from the litigant in the earlier proceedings will be bound by a judgment in the earlier proceedings if the interest which he claims was one which he obtained subsequent to the judgment. Littledale J said in the Earl of Derby case, at page 789:

"A passage has been cited from Com. Dig. Evidence, A5, where it is said that "a verdict in another action in the same cause may be allowed in evidence between the same parties. So, it shall be evidence, where the verdict was for one under whom any of the present parties claim." But that must mean a claim acquired through such party subsequently to the verdict: if, as it has now been argued, the rule could be extended to parties claiming other lands under the same title previously to the verdict, the effect of such a verdict might be carried back for a hundred years. None of the cases support such a proposition."

19. This statement of principle was approved by Channell B in Hodson –v- Walker (1872) LR 7 Exch 55 at page 61. In Re de Burgho's Estate [1896] IR 274. Madden J put it in this way:

"According to the clear principles of the law of estoppel, it is necessary, in order to estop the objector, to show that he derives title under Dwyer by act or operation of law subsequent to the recovery of the judgment. If this is shown it is reasonable that he should be estopped, because his estate was represented at the time of the recovery of the judgment though not in his person"

20. This clearly has echoes of a judgment in rem. But it nonetheless provides a logical basis for the operation of the estoppel. For it is trite law that the court should be cautious about applying an estoppel which could produce, in effect, a fiction. As Sir Robert Megarry V-C said in Gleeson –v- Wippell at page 516:

"Any contention which leads to the conclusion that a person is liable to be condemned unheard is plainly open to the gravest of suspicion."

21. The rationale of the principle stated so succinctly by Madden J is that the person defending (or claiming) in the first action should be concerned with precisely the same right which is in issue in the second. If he claims that he has passed on whatever title or interest he had to a third party, he is no longer defending or representing that title or interest. He is defending himself against a purely personal liability. Whilst in most cases it may well be necessary for him, in order to do so, to seek to defend the title or interest that he claimed, that will not necessarily always be the case. On the other hand, it is obviously right as Cababe said in the passage referred to in Spencer Bower in the passage to which I have already referred, that the successful litigant in an action in which title has been in issue should not have the judgment frustrated by the unsuccessful litigant immediately seeking to dispose of the property in question.
22. Halsbury at paragraph 1001 and Spencer Bower at page 121 suggest that the privy could be bound if his title arose after commencement of the proceedings in which the judgment was given. Both base the suggestion upon a dictum of Ungoed-Thomas J in Pople–v- Evans [1969] 2Ch 255 at 261. The only support for the possible extension of the principle of privity to an interest obtained after commencement of an action would appear to be a dictum of Romer J in Mercantile Investment and General Trust Company –v- River Plate Trust, Loan and Agency Company [1894] 1 Ch 578 at page 595. Neither dictum is based on any authority; and it seems to me more consistent with the general principle set out by Sir Robert Megarry V-C to which I have referred to above, in paragraph 20 that an estoppel by reason of privity should be restricted to those whose claim to title arose after judgment.
23. The explanation for the dicta of Romer J and Ungoed-Thomas J may be that they were considering not the principles applicable to a privy by reason of interest, but the more general principle enunciated by Sir Robert Megarry V-C which I have referred to in paragraph 16 above. In other words they may have considered that the existence of an action at the time that the party sought to be estopped obtained whatever title he claimed might in some general sense be said to raise a sufficiency of interest, at least if he had notice of the action, to justify precluding him from relitigating the issues decided in those proceedings. In Nana Ofori Atta (II) –v- Nana Abu Bonsra (II) [1958] AC 95, at page 102, Lord Denning, giving the advice of the Privy Council said:

"Those instances do not however cover this case, which is not one of active participation in the previous proceedings or actual benefit from them, but of standing by and watching them form out most giving evidence in support of one side or the other. In order to determine this question the West African Court of Appeal quoted from a principle stated by Lord Penzance in Wytcherley –v- Andrews (1871) LR 2 P. and M. 327, 328. The full passage is in these words:

"There is a practice in this court, by which any person having an interest may make himself a party to the suit by intervening; and it was because of the existence of that practice that the judges of the Prerogative Court held, that if a person, knowing what was passing, was content to stand by and see his battle fought by somebody else in the same interest, he should be bound by the result and not be allowed to re-open the case.""

24. That principle has not been developed. Indeed it was doubted by Dankwerts and Diplock LJJ in In the Estate of Langton Deceased [1964] p. 163 as being a rule only applicable to a case in the Probate Division. However, it was approved by Stuart Smith LJ in House of Spring Garden Ltd –v- Waite and Others [1991] 1 QB 241 at page 253 E as being of general application.
25. In the light of these authorities, even though there is no direct authority to this effect, I am prepared to accept that where title to goods is in dispute, the same principles can be applied by analogy as those which are applicable to disputes relating to interests in land. In other words a person claiming title is privy to the interests of those through whom he claims that title for the purposes of the operation of the doctrine of estoppel per rem judicatum but only if the title he claims was acquired after the date of the judgment.
26. It follows that Mr Powell is not precluded by these principles from claiming good title to the Rallye, which he purchased before the date of the judgment in question. He can only be precluded from asserting good title by reason of the wider principles suggested in the judgment of Sir Robert Megarry V-C in Gleeson –v- Wippell and the approval by Stuart Smith LJ in House of Spring Gardens –v- Waite of the citation from Lord Denning in Nana Ofori. Whatever may be said about the position of Mr Etherington, Mr Heapy who gave evidence in the earlier proceedings, and Mr Storey it has never been suggested that Mr Powell stood by in the knowledge of the proceedings, let alone took any part in them. On the other hand, it is clear from the judgment of HHJ O'Rorke, that Mr Wiltshire knew full well that by the time his claim came to trial, the Rallye was in the possession of Mr Powell. He took no steps to join Mr Powell in the proceedings nor did he take any steps in relation to Mr Powell to protect his claimed ownership in the aircraft. It is a pity that HHJ O'Rorke did not indicate to Mr Wiltshire that it would be necessary to join Mr Powell in the proceedings in order to ensure that the issues could be fully and properly litigated in those proceedings. I can see no reason why, in those circumstances, justice requires the court to consider Mr Powell to be bound by that earlier judgment on any of the principles to which we have been referred. And for the reasons given by Arden LJ in her judgment, a draft of which I have had the opportunity to read, it was inappropriate to give a judgment in the form of a declaration suggesting that it resolved any issue other than that between the parties to that action.
27. I would accordingly dismiss this appeal.

Lady Justice Arden :

28. I gratefully adopt Latham LJ's recitation of facts. I agree that this appeal should be dismissed.
29. Stripped of inessential detail, the material facts of this case and the order in which they occur are as follows:-

A claims ownership of an aeroplane held by B.

B sells the aeroplane to C.

C sells the aeroplane to D.

In action brought by B against A, A obtains a declaration against B that he owns the aeroplane. C and D are not parties to this litigation.

A contends that the judgment which he has obtained against B is binding on D.

30. A particular feature of this case is that C and D derive their title from B and that both judgments concern the ownership of the same aircraft. It is common ground that A's contention can only succeed if C and D are "privies" in respect of the judgment which A obtained against B. It is not suggested that D is liable on any other basis.
31. In my judgment, the case of Hodson v Walker (1872) Ex 55 is authority for the proposition that estoppel per rem judicatam cannot bind a person who claims under the person against whom a judgment was obtained, unless he obtained his interest from that person after the judgment was given. In summary, Hodson v Walker concerned premises known as the Red Lion Inn, Grasmere and certain outbuildings. In February 1852, Walker allowed one Usher, who owned the Red Lion Inn, to build a shed on his (Walker's) adjoining land in return for a rent of 1s. a year. In November 1852, Usher demised the Red Lion Inn to Hodson and the lease included the shed. In 1870 Walker brought proceedings against Usher for possession of the shed. He obtained judgment and a warrant was issued to the bailiff who recovered possession on Walker's behalf. Hodson, who thereby lost possession, brought proceedings for trespass. At trial Martin B ruled that Hodson had no cause of action on the basis that the order of the County Court bound him as well as Usher. An application was made to the Court of Exchequer Chamber to discharge this rule. The Court of Exchequer Chamber is a court of co-ordinate jurisdiction with this court. The first judgment was given by Pigott B. He held that the statutory provisions giving the County Court power to make an order for possession did not bind persons who were not party to the proceedings and that accordingly the rule had to be discharged. Pigott B clearly thought it was arguable that Hodson could bring an action in trespass where the superior landlord had obtained judgment against the intermediate tenant. By implication, therefore, he must have accepted that Hodson was not bound by the judgment against Usher because, if he had been, that would have been a complete answer to his claim in trespass. The second judgment was given by Channell B. As Latham LJ has said, Channell B approved the statement of Littledale J in Doe v Earl of Derby that a verdict which is evidence against A is not admissible against B on the ground that B claims under A unless B acquired his interest from A's title subsequent to the verdict. That was the primary basis on which Channell B held that the rule made by Martin B at trial had to be discharged. He also came to the same conclusion as Pigott B on the question of statutory interpretation.
32. The third judgment was given by Martin B, who, curiously to modern eyes, was sitting on the application to discharge the rule that he had made. Martin B dissented on the question of statutory construction. He did not refer to the question of estoppel per red judicatam. However, if he had thought it was a good point, it would have been unnecessary for him to deal with the question of statutory construction.
33. Accordingly, in my judgment, Hodson v Walker is an authority for the proposition which is necessary for the respondents in this appeal, namely that they are not bound as privies in estate with Mr Ebbs, because their interest was obtained prior to the date of the order of HHJ O'Rorke. As such, it may indeed be binding on this court (see Brotherton v Aseguradora Colseguros SA [2003] EWCA Civ.705 at paragraph 19, footnote 1). I would certainly follow it in any event.
34. Estoppel per rem judicatam works mutually. As Lord Chief Baron Gilbert in his treatise on evidence, which is quoted by Coleridge J in Wenman v McKenzie (1855) 5 E&B 447, 458, put it "nobody can take benefit by a verdict that had not been prejudiced by it, had it gone contrary". Accordingly, if C and D had acquired their interest from B but after judgment in the action brought by A against B, and in that action B had obtained a declaration that B was the owner of the aircraft, C and D could have claimed that they were privies in estate with B and that A was, therefore, estopped from starting new proceedings against them to contest their ownership of the aircraft.
35. In his skilful argument, Mr Keith, for Mr Wiltshire, contended that Mr Powell was bound by privity of interest. As to the meaning of privity of interest, he relied on the dictum of Sir Robert Megarry VC in Gleeson v J Wippell & Co [1977] 1 WLR 510 at 515, which was approved by Lord Bingham in Johnson v Gore Wood & Co [2002] 1 AC 1, 32. Mr Keith submits, therefore, that Mr Powell will be bound even if Mr Ebbs had no proprietary interest in the aircraft at the time of the judgment. Indeed, he submits that privity should not depend on the existence of a proprietary interest because it is that very interest which is in question. For my part, I consider that, if a successor in title to property is not bound by an earlier judgment as a privy in estate, it cannot be just, without further facts, that he should be treated as a privy of interest. This is not a case where the respondents stood by and watched Mr Ebbs and Mr Wiltshire fight out the battle for them. Accordingly, I would reject Mr Keith's submission on privity of interest.
36. Res judicata promotes the important public policy of finality in legal proceedings and thus legal certainty. In addition, a party has a right under article 6 of the European Convention on Human Rights (the Convention) to the proper enforcement of any judgment that he obtains: see Hornsby v Greece (1997) 24 EHRR 250. The result in the present case is not to deprive Mr Powell of any property contrary to article 1 of the First Protocol to the Convention. If he had acquired title from Messrs Etherington, Heapy and Storey after the judgment obtained by Mr Wiltshire against Mr Ebbs, and had lost his title as a result of estoppel per rem judicatam, the interference with this property would, in my judgment, have been justified by the rule of law in question for the following reason. If there was no estoppel per rem judicatam in this situation, the result would always be that a defendant to an action about the ownership of property could always avoid the result of an adverse judgment by disposing of the property before the judgment was enforced. That could clearly be an intolerable state of affairs and thus the rule is justified under article 1.
37. Mr Keith submits that there is a danger of multiplicity of proceedings as a result of the proposition referred to above. In my judgment, the more compelling interest is that, using the letters given in my summary of the problem above, C and D should not have their right to contest A's claim to ownership of the property taken away without their knowledge or consent save in exceptional circumstances. I have already explained why, in my judgment, those exceptional circumstances, namely that they acquire their title after judgment against B, are justified.
38. Accordingly, I too would dismiss this appeal.
39. I wish to conclude with some observations about the form of the declaration made by HHJ O'Rorke.
40. I do not find it as surprising as Latham LJ that there is little authority on the present point. The precise form of the order made by HHJ O'Rorke was as follows:-

"2. The aeroplane described as the Rallye G-AVVJ was at all material times the property of Timothy James Wiltshire as trustee of the Spilsby Soaring Trust and remained such at the time, on or about the 4 July 1998, of its purported sale to Messrs Paul Etherington, Derek Heapy and Peter Storey."

41. The declaration thus drawn gives rise to the impression that Mr Wiltshire remained the owner of the aircraft notwithstanding its sale by Mr Ebbs to Messrs Etherington, Heapy and Storey. The declaration fails to make it clear that it could only deal with the position as to the ownership of the aircraft so long as no party other than Mr Ebbs had acquired, or purported to acquire, an interest in it.
42. Prior to the Civil Procedure Rules, declaratory judgments were the subject of RSC Ord. 15 r.16. and the commentary under that rule in the Supreme Court Practice stated that:-

"The jurisdiction of the Court to make a declaration of right is confined to declaring contested legal rights, subsisting or future of the parties represented in the litigation before it …"

43. On this basis, the form of declaration which HHJ O'Rorke should have made was as to the ownership of the aircraft immediately prior to the sale by Mr Ebbs to Messrs Etherington, Heapy and Storey.
44. RSC Ord. 15 r.16 has now been replaced by CPR 40.20. The commentary in Civil Procedure (Autumn 2003), volume 1 at 40.20.1 states that CPR 40.20 is to the same effect as the former RCS Ord. 15, rule 16. Accordingly, the declaration which HHJ O'Rorke made does not follow the usual practice of the court. Therefore it is perhaps not surprising that the problem that has arisen in this case has not arisen in any previously reported authority (as far as the researches of counsel show). If the declaration contained in the order of HHJ O'Rorke had been in an appropriate form, the problem in this case may well not have arisen.
45. The commentary formerly contained in The Supreme Court Practice as to whether it is appropriate to grant a declaration has been updated in Civil Procedure. However it has, as a result, now lost the sense that declarations should go no further than declare the rights of the parties before the court. I hope that editors of the commentary on the CPR in Civil Procedure and other works will consider this point for the future.

Holman J:

46. I also agree that this appeal should be dismissed.
47. I agree with my Lord, Latham LJ that it is surprising that there is apparently no authority nor clear statement of principle as to the application of the doctrine of estoppel of privies to the sale of goods.
48. To apply the same rules as to estoppel of privies to goods as to land may appear to blur important distinctions between land and goods. But it does not do so, for I agree with the submission of Mr Keith, on behalf of the appellant Mr Wiltshire, that the application of the doctrine of res judicata to privies does not depend and is not based upon proprietary rights. Rather, as Lord Reid said in Carl Zeiss Stiftung v Rayner and Keeler Ltd (No 2) [1967] 1 AC 853 at 936, it requires "that the person now to be estopped from defending himself must have had some kind of interest in the previous litigation or its subject matter." As Megarry V-C said in Gleeson v J. Wippell and Co Ltd [1977] 1 WLR 510 at 515, "the substratum of the doctrine is that a man ought not to be allowed to litigate a second time what has already been decided between himself and the other party to the litigation. This is in the interest both of the successful party and of the public." So the foundation of the doctrine is not proprietary rights but the quite different need for finality in litigation.
49. Where, however, the actual party sought to be bound was not himself a party to the previous litigation, the principle of finality may conflict with another important principle that "Any contention which leads to the conclusion that a person is liable to be condemned unheard is plainly open to the gravest suspicions. A defendant ought to be able to put his own defence in his own way and to call his own evidence." (Megarry V-C at page 516 B). Accordingly "He ought not to be concluded [sic., but perhaps should read "precluded"] by the failure of the defence and evidence adduced by another defendant in other proceedings unless his standing in those other proceedings justifies the conclusion that a decision against the defendant in them ought fairly and truly to be said to be in substance a decision against him."
50. The importance of the need for finality is not simply that of avoiding a multiplicity of actions. It is also as explained by Cababe in his "Principles of Estoppel" (1888) and cited by Spencer Bower Turner and Handley in "The Doctrine of Res Judicata" 3^rd edition (1996), page 119 paragraph 231:

"…although the estoppel is only a personal matter between the particular parties yet to really give the parties the benefit of it, and subject them to the burden of it, it is essential that not they only, but those of whom it can be predicted that they are their representatives in interest should likewise have the benefit of and be subject to the burden of the admission."

51. In my view this rationale applies with equal force in relation to goods as it does to land. If after A has obtained a final judgment establishing that a chattel belongs to A rather than B, A wishes to sell it, it is essential that the purchaser can rely on the judgment as against B for otherwise A cannot really benefit from his judgment. Any alternative view would lead to uncertainty and commercial chaos.
52. So I would hold that the doctrine of privity applies in the same manner to a judgment determining the ownership of goods as it does to one determining the ownership of land.
53. The next question is, however, the scope or boundary of that doctrine and, specifically, whether it extends to bind a purchaser (whether of land or goods) when the sale took place before the date of the judgment relied upon.
54. As a matter of principle it seems to me impossible to hold that privity arises when the sale took place even before the commencement of the proceedings. For if it did, then ex hypothesi the vendor no longer had an interest in the subject matter during the currency of the proceedings. If A has already sold to C then in reality it is C not A who has an interest to defend in the proceedings and a decision against A cannot possibly "fairly and truly be said to be in substance a decision against" C.
55. In my view the same principle applies to sale during the course of proceedings but before judgment. From the moment that A has sold, he has ceased to have an interest in the subject matter and has not reached the point where he needs "really" to obtain the benefit of the judgment. The unfairness of binding the purchaser in such circumstances is well illustrated by the facts of the present case. During the course of the proceedings Mr Ebbs purported to sell the aeroplane. He later became bankrupt and neither he nor his trustee in bankruptcy actively maintained their defence to the claim by Mr Wiltshire so that, by the time he gave judgment, His Honour Judge O'Rorke was hearing argument from one side, Mr Wiltshire, alone. (I stress, however, that where the doctrine of privity does apply, then it cannot be defeated by examining the sufficiency or quality of the defence to the first action.)
56. Turning to authority, I have read in draft the judgment of my Lady, Arden LJ. I gratefully adopt her analysis of Hodson v Walker (1872) LR VII Exch 55 and agree that it is English authority for the proposition that a person is not bound as a privy unless he acquired his interest after the date of the verdict or judgment relied upon.
57. In my view the principle was correctly and most succinctly stated by Madden J in the Irish case of In Re De Burgho's Estate [1896] 1 Irish Reports 274 at 280 where he said:

"According to the clear principles of the law of estoppel it is necessary, in order to stop the objector, to show that he derives title…by act or operation of law subsequent to the recovery of the judgment. If this is shown it is reasonable that he should be estopped, because his estate was represented at the time of the recovery of the judgment though not in his person."

58. In Mercantile Investment and General Trust Company v River Plate Trust, Loan, and Agency Company [1894] 1 Ch 578 at 595, Romer J said that "A prior purchaser of land cannot be estopped as being privy in estate by a judgment obtained in an action against the vendor commenced after purchase." However on the facts of that case the question of purchase after commencement of the action but before judgment did not arise for consideration and there is nothing in that dictum or elsewhere in the judgment to indicate that in such a case the purchaser would be bound.
59. In Pople v Evans [1969] 2 Ch 255 at 261A, Ungoed-Thomas J was quoting a passage from Halsbury's Laws of England when he "added" that "…the title relied on to establish such privity must arise after the judgment on which the res judicata is based, or at any rate after the commencement of the proceedings in which that judgment was made…" But he immediately continued "…and such title as Mrs Pople might have here arose before relevant proceedings were commenced." The observation is, accordingly, entirely obiter; and no authority is cited for the proposition "or at least [subsequent] to the beginning of the proceedings" in the corresponding paragraph (1001) in the current edition of Halsbury's Laws of England to that quoted by Ungoed-Thomas J.
60. In my view neither these dicta of Romer J and Ungoed-Thomas J nor the passage in Halsbury's Laws of England require or justify that we enlarge the scope of the estoppel so as to bind a person who purchased before the date of the judgment relied upon.
61. I would accordingly hold that a purchaser is only bound as a privy if the purchase took place after the date of the judgment relied upon.
62. In this case Messrs Etherington, Heapy and Storey and also Mr Powell all purchased the aircraft before the date of the judgment of His Honour Judge O'Rorke and in my view none of them is bound by it.
63. I appreciate that this leads to the unedifying position that there are two different judgments of His Honour Judge O'Rorke and Mr Recorder Maw which conflict in their determination of the same issue. That could and should have been avoided by Judge O'Rorke joining Messrs Etherington, Heapy and Storey and also Mr Powell as parties to the proceedings before him, since he was well aware of the successive purported sales to them. But the fact that the judgments conflict should not be a reason for extending the doctrine of privity so as unfairly to bind those purchasers.
64. I would accordingly dismiss this appeal.
Order: Appeal dismissed with costs to be assessed if not agreed. Leave to appeal refused. (Order does not form part of the approved judgment)